WHERE HUMAN CAPITAL COUNTS BY OMAR MOUALLEM ILLUStratION Dave WEBBER Meet Inside the world of Edmonton’s most reclusive – and divisive – citizen “ I don’t think his dad would have made all IT SHOULD HAVE BEEN A HAPPY OCCASION. There was Edmonton Mayor Stephen Mandel, standing shoulder to shoulder with Oilers president those deals and grown things, and taken Patrick LaForge in front of a throng of reporters to announce that, at long chances like Daryl. He is definitely a very last, the deal was done. The Edmonton Oilers would soon be moving into [ shrewd businessman.” – CONRAD LEWANDOWSKI [ a new $600-million arena and entertainment district, the city’s downtown core would get the boost that Mandel had been saying it needed, and every- one would, in the end, come out a winner. But while his words paid tribute to that idea, his body language told a much different story. The usually dapper mayor looked tired and drawn. His counterparts from the other side [ of the negotiating table didn’t look much better. > 26 THE KATZ GROUP V250 RANK: 26 | REVENUE: $3.5 BILLION (EST) | NUMBER OF EMPLOYEES: 8,600 | CHIEF EXECUTIVE OFFICER: DARYL KATZ 84 ALBERTAVENTURE.COM SEPTEMBER 2013 SEPTEMBER 2013 ALBERTAVENTURE.COM 85 OF COURSE, IF THEY LOOKED SLEEP-DEPRIVED, NO ONE him for? Or is he exploiting Edmonton’s inferiority complex and its love of would blame them. Just a week earlier, it looked as though four the Oilers, in order to line his already deep pockets? “ The one thing that I’ve given to the com- years of negotiations between council and billionaire Oilers pany is that I’m very aggressive by nature. owner Daryl Katz might come to nothing. But on the morning of May 15, with just hours left on the clock, Katz chipped in the LONG BEFORE THE HUFFINGTON POST NAMED DARYL KATZ ALBERTA’S You know, like when you’re a kid and you $15 million that was needed to finally close the deal. There were inaugural Villain of the Year in 2012, he was in the business of selling ice get a new toy? The excitement you feel plenty of people – voters and politicians both – who balked at cream – frozen yogurt, to be exact. Yogen Früz co-founder Aaron Serruya when you get that new toy? Then it wears subsidizing a new arena for someone who could theoretically says Katz, then a 29-year-old lawyer with a background in corporate and off. You need another toy.” – Daryl KatZ pay for five or six of them, but Katz and his supporters were franchise law, approached him in 1990 as part of a group of investors who [ [ committed to the idea that it would reinvigorate fortunes for wanted to buy the master franchise rights for Alberta. Within two months both Edmonton’s favourite team and its neglected downtown they’d made a deal and, within three years, Katz had built a network of about core. “This is about building a future for tomorrow,” Mandel 20 Yogen Früz stands. “I found him to be very competitive and motivated,” After 10 years in the business, Katz had accumulated quite a told the press. After restating the virtues of the deal for the Serruya says. “Daryl was always committed to growth and success, but few toys. The series of deals, both large and small, had produced umpteenth time – and feting Katz for his vision and commitment at a methodical and thoughtful pace.” a growing retail empire with nearly 1,200 Canadian locations. to the city – Mandel drew the assembled crowd’s attention to While Katz enjoyed success as an investor in a retail franchise, that was only How did he do it? Katz’s buying spree was largely bankrolled his right and appeared to invite the man of the hour into the spot- part of the formula that would turn him into a multi-millionaire. The other lay by internal cash flow, a strategy that seemed to pay off at first. light. “Daryl, would you like to say something?” But, as usual, in the pharmaceutical business, where his father, Barry Katz, had owned Between 1998 and 2003, the group’s sales soared from $500 Katz wasn’t there. Instead, the mayor’s gesture was to a black and operated drugstores since the 1950s. By the time his only son Daryl was million to $4 billion, while its roster of stores grew to 1,800. But telephone. Katz was literally phoning it in. “I’m sorry I couldn’t attending high school and playing tennis competitively (he competed across the company may have grown too fast for its own good, as prob- be at today’s council meeting,” he said. Before briefly thanking Canada and the U.S., and in 2003 paid tribute to the sport by buying the naming lems with inventory management led to $10 million in writeoffs the mayor and council, he turned his comments to the people of rights to Toronto’s premier tennis facility, now dubbed the Rexall Centre), the in both 2004 and 2005, and eventually to the termination of Edmonton. “This is a once-in-a-generation opportunity. I can’t elder Katz decided to embark on a new venture. Barry became the chairman of Norman Puhl, the former Shoppers Drug Mart vice-president tell you how exciting it is for me and everyone at Katz Group to Value Drug Mart, a co-operative ownership group founded by 13 pharmacist- whom Katz had recruited as CEO in 1998 and later became think about having 20,000 people downtown, night after night, owners. In time, this grew into a mini-chain that at one point had as many as vice-chair in 2003. enjoying a game.” 80 stores. But Puhl, who was dismissed shortly thereafter, didn’t exactly To an outsider, such a performance would be taken as an In 1991, Daryl Katz decided it was time for him to get into the game. Along take it lying down. He sought damages for wrongful termin- insult. But the people in that room were not outsiders. The jour- with his father and Barry’s friend and pharmacist Van Gardener, he pur- ation. According to court documents, Katz blamed him for nalists and city councillors present had dealt with Katz by proxy chased the Canadian franchise rights to Medicine Shoppe, a pharmacy chain “projections which were inaccurate and misleading,” and took for years, and for them the chance to hear Katz’s voice was with nearly 1,000 outlets in the U.S. They hoped to expand to 100 locations Puhl to task for seeking stock option payouts that he believed practically a paranormal experience. In our hyper-connected in Canada within half a decade. The next year, in a paid Edmonton Journal ad- would hurt the company. An email that Katz sent to his CFO, world full of conspicuous over-sharers and self-promoters, the vertising feature, Daryl Katz (then co-vice-president, alongside Gardener, with Paul Marcaccio, in 2003 shows just how much the relationship pharmacy mogul is a more than an exception – he’s an anomaly. Barry at the helm) said, “We are not in the business of selling general merchan- had deteriorated. “I will not let him off the hook … If we have to The chairman of the Katz Group of Companies seldom speaks dise.” That caught the attention of pharmacist Conrad Lewandowski. go it without him, so be it. It will be to his detriment.” Today, the to reporters. He sends colleagues to represent his company at The Edmonton druggist, who still owns and operates the original Medicine pharmacy giant bankrolled his second big acquisition, 143 Pharma Plus inner turmoil that plagued the company during its expansion charitable events. He doesn’t pose for pictures. He sure as hell Shoppe store, remembers Daryl Katz as being “brave” and “gutsy,” and says it stores, popular in Eastern Canada, with a $60-million loan. But the details phase seems to have tapered off, in part because Katz Group doesn’t tweet. His company’s website looks like a placeholder, was quickly apparent that the apple had fallen a fair distance from the tree. “I around the acquisitions that followed – 165 Drug Emporiums, 141 Snyders unloaded a substantial portion of its holdings, including the and he keeps details of his fortune to himself. He doesn’t just don’t think his dad would have made all those deals and grown things, and taken Drug Stores, and a hodgepodge of other struggling stores both north Medicine Shoppe franchise that started it all, to McKesson in shun the spotlight; he’s practically taken out a restraining order chances like Daryl,” he says. “He is definitely a very shrewd businessman.” and south of the border – have remained some of the industry’s best- January 2012 for nearly $1 billion. against it. By 1996, Katz had turned his attention away from the Medicine Shoppe kept secrets. For his part, Puhl - like most of Katz’s past and present col- And while most Edmontonians can agree, however grudgingly, franchise and toward an ailing 100-year-old drugstore chain called Pharmx What isn’t a secret is the fact that Katz likes to make deals – loves it, even. leagues - declined an interview for this article. Others, including that Katz is an influential businessman with a keen eye for the Rexall. According to an interview Katz did with Forbes in 2002, Medicine “The one thing that I’ve given to the company is that I’m very aggressive by friends and university classmates, didn’t return calls and emails.